United States v. Heine

United States District Court, D. Oregon

July 26, 2017

UNITED STATES OF AMERICA,v.DAN HEINE and DIANA YATES, Defendants.

Billy
J. Williams, United States Attorney, and Claire M. Fay,
Michelle Holman Kerin, and Quinn P. Harrington, Assistant
United States Attorneys, United States Attorney's Office
for the District of Oregon, Of Attorneys for the United
States of America.

Defendants
Dan Heine (“Heine”) and Diana Yates
(“Yates”) are charged in this criminal action
with conspiring to commit bank fraud and making false bank
entries, reports, or transactions during the time when they
were the two most senior officers of The Bank of Oswego (the
“Bank”).[1] The Court has scheduled a five-week jury
trial to begin on October 10, 2017. On June 27, 2017, Yates
filed her Amended Motion to Vacate Fourth Trial Management
Order. ECF 758. In her motion, Yates asserts that the Bank
“has stopped paying Ms. Yates's attorneys'
fees, experts, document hosting fees, and other costs, and
has indicated that it is considering whether to file
bankruptcy.” Id. at 1-2. Thus, argues Yates,
“the basic tools of the defense are unavailable because
of the Bank's failure and refusal to pay past fees and
expenses, while future payments of any kind are
uncertain.” Id. at 3. Yates “therefore
requests that all pretrial deadlines and the trial date be
vacated until efforts to negotiate a resolution with the Bank
and HomeStreet Bank are completed.” Id. For
the reasons that follow, Yates's motion is denied.

BACKGROUND

Heine
and Yates co-founded the Bank in 2004. Until August 2016, the
Bank had been a financial institution engaged in the business
of personal and commercial banking and lending, headquartered
in Lake Oswego, Oregon. Heine previously served as the
Bank's President and Chief Executive Officer. Heine also
was a member of the Bank's Board of Directors
(“Board”). Heine left the Bank in September 2014.
Yates previously served as the Bank's Executive Vice
President and Chief Financial Officer. Yates also was the
Secretary of the Board. Yates resigned from the Bank on March
22, 2012.

On June
24, 2015, a federal grand jury issued a 27-seven count
indictment against both Heine and Yates for conduct related
to their time with the Bank. On March 9, 2017, a federal
grand jury returned a 19-count Superseding Indictment in this
case. The Superseding Indictment (“Indictment”)
charges Heine and Yates with one count of conspiring to
commit bank fraud, in violation of 18 U.S.C. § 1349, and
multiple counts of making false bank entries, reports, or
transactions, in violation of 18 U.S.C. §§ 2 and
1005. The Indictment alleges that between September 2009 and
September 2014, Heine and Yates conspired to defraud the Bank
through materially false representations and promises. The
Indictment further alleges that one of the purposes of the
conspiracy was to conceal the true financial condition of the
Bank from the Board, the Bank's shareholders, the public,
and the Bank's regulators, including the Federal Deposit
Insurance Corporation. According to the Indictment, Heine and
Yates reported false and misleading information about loan
performance, concealed information about the status of
foreclosed properties, made unauthorized transfers of Bank
proceeds, and failed to disclose material facts about loans
to the Board, shareholders, and regulators, all in an effort
to conceal the Bank's true financial condition.

On
August 26, 2015, two months after the grand jury returned the
original indictment, Heine brought a civil action against the
bank. Heine, a citizen of Florida, filed his lawsuit against
the Bank, a citizen of Oregon, in federal court in the
District of Oregon, invoking diversity jurisdiction. In his
civil lawsuit, Heine sought both declaratory relief and
advancement of his reasonable legal fees and expenses in
connection with his defense of the federal criminal action,
pursuant to the Bank's indemnification obligations
contained in its Articles of Incorporation. On November 13,
2015, the Court, through the undersigned district judge, held
that Heine was entitled to advancement of his reasonable
legal fees and expenses of defense. Heine v. The Bank of
Oswego, 144 F.Supp.3d 1198 (D. Or. 2015). Yates,
however, was unable to join Heine's civil lawsuit or file
her own federal court action against the Bank because she was
a citizen of Oregon, thereby precluding diversity
jurisdiction.

On
October 14, 2015, in the pending criminal case, Yates moved
to compel the Bank of Oswego to advance legal fees. Yates
made the same contract arguments that Heine asserted in his
civil lawsuit based on the Bank's indemnification
obligations contained in its Articles of Incorporation. In
her motion against the Bank brought in the pending criminal
action, Yates asserted that the Court has ancillary
jurisdiction to resolve Yates's private contract claim
against the Bank. The Court disagreed and denied Yates's
motion on January 4, 2016, concluding that Yates's motion
for contractual relief against the Bank did not fall within
the Court's jurisdiction in this criminal case.

In
March 2016, Yates filed a civil lawsuit against the Bank in
state court in Oregon. Yates v. The Bank of Oswego,
Case No. 16-CV-07657 (Clackamas County Circuit Court).
Shortly thereafter, Yates and the Bank entered into a
settlement agreement under which Yates abated her civil
lawsuit and released the Bank from claims in exchange for the
Bank's agreement to advance reasonable expenses incurred
by Yates in defending the criminal action. ECF 548 at 1-2
(¶ 3). By August 2016, Heine and Yates's combined
advancement expenses exceeded the limits of the Bank's
Director & Officer insurance policy, and the Bank then
began to pay Defendants' requested advancement expenses
with its own funds. Id. By November 2016, the Bank
began TO pay less than all of Yates's submitted bills.
ECF 758 at 4.

On
January 26, 2017, the Bank filed a non-party motion in this
criminal action, asking the Court to review for
reasonableness the detailed billing statements from counsel
for Heine and Yates. ECF 547. In its motion, the Bank stated
that it “remains committed to satisfying any
obligations it may have to advance Defendants'
reasonable criminal defense fees and
expenses.” Id. at 2 (emphasis in original). In
its motion, the Bank disclosed the substantial amount that it
had already paid as of November 4, 2016.[2] The Bank added
that it had recently received bills from counsel for Yates
and Heine for work performed in October and November, and
“the resulting legal bills, by any standard, are
grossly excessive and unreasonable.” Id. The
Bank explained that it had “reduced Yates's and
Heine's recent bills for attorneys' fees by fifty
percent and forty percent, respectively” and
“[o]ther than the reduction for attorneys' fees, no
other reductions were made by the Bank.” Id.
(footnotes omitted). Heine objected to the Court reviewing
for reasonableness the invoices that his counsel had sent to
the Bank, arguing that such a review is
“premature.” Id. at 1.[3] Yates, however,
did not object to the Court reviewing for reasonableness her
counsel's billing statements. ECF 563. On February 16,
2017, the Court declined to exercise ancillary jurisdiction
in this criminal case over the non-party Bank's fee
dispute with either Heine or Yates. ECF 581.

In her
opening motion to vacate, Yates asserted that the Bank had
not yet paid Yates's counsel for any services rendered
after January 2017 and that the Bank recently stated that it
is considering filing for bankruptcy unless a resolution can
be reached regarding the Bank's ongoing obligations to
advance defense costs. Yates originally asked the Court to
vacate the trial date of October 10, 2017 and set a status
conference at some point in the future so that Yates's
counsel can report back regarding her efforts to resolve the
matter. In her reply, Yates asserts that the Bank recently
paid a portion of her counsel's February 2017 invoice and
that the Bank's counsel recently stated that the Bank was
considering pursuing legal action in state court regarding
the reasonableness of counsel's legal fees and expenses.
Yates concludes her reply by asking the Court to vacate the
current trial schedule, continue the trial date to February
2018, and set a status conference in 60 days so that
Yates's counsel can report what progress has been made
toward resolving the funding issues. Both the Government and
Defendant Heine oppose Yates's motion and urge the Court
not to continue the trial date, which is currently set to
begin on October 10, 2017.

STANDARDS

A.
Motion to Continue Trial Date

When a
defendant in a criminal case moves for a continuance of the
trial date, the court must consider the following four
factors: (1) the defendant's diligence in preparing for
trial; (2) the likelihood that the requested continuance will
satisfy the defendant's needs that underlie the request
for continuance; (3) the inconvenience that a continuance
will cause the Court and the Government; and (4) the extent
to which the defendant will suffer harm if the request for
continuance is denied. United States v.
Zamora-Hernandez, 222 F.3d 1046, 1049 (9th Cir. 2000).
“The fourth factor is most critical.”
Id. These four factors are well established in the
law. See United States v. Tham, 960 F.2d 1391, 1396
(9th Cir. 1992); United States v. Shirley, 884 F.2d
1130, 1134 (9th Cir. 1989).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;B.
Sixth Amendment Right to ...

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